KiwiSaver

The predicted consolidation in the KiwiSaver market is likely to produce more work for advisers.

Speculation is brewing about the impending sale of Tower’s fund management business, including its $900 million KiwiSaver scheme.

BNZ, which recently registered its own scheme, and Fisher Funds are among those touted as possible buyers.

Meanwhile, TSB Bank – which doesn’t have a KiwiSaver scheme – has been reported to be interested in buying Fisher Funds.

Tim Fairbrother, an authorised financial adviser (AFA) for Wairarapa-based Rival Wealth, said his company took a “house view” as to which KiwiSaver providers it recommended and if one of those providers was snapped up it would assess what effect the purchase would have on its recommendation.

“We’d make a blanket communication to our clients saying we’ve made this decision: let’s change or let’s stick with it, and then wait for people to come back to us.  We’d send them something to sign off,” he said.

Fairbrother said only clients with balances of more than $50,000 would be consulted individually, he said.

Tower Investments chief executive Sam Stubbs wouldn’t comment on the speculation about his firm, but he said he had been surprised that the expected consolidation in the KiwiSaver market hadn’t happened earlier.

Stubbs said the reason was probably KiwiSaver’s rapid growth, which had taken even fund managers such as Tower by surprise. 

If advisers had KiwiSaver remuneration agreements with higher commission levels than those offered by the fund manager taking over the scheme, they would usually stay on the higher pay rate until their contract came up for renewal, Fairbrother said.

Impressive returns in equities and property have helped KiwiSaver growth funds achieve strong results in 2012, according to Morningstar’s latest KiwiSaver survey.

In the 12 months to December 31 growth fund returns averaged 14.0%, well ahead of balanced funds (12.4%), moderate funds (9.7%) and conservative funds (including default options), which averaged 7.9%.

The double-digit returns enjoyed by growth investors were driven by equities, which returned 24.18% on the NZX 50 and 9.52% in global shares in 2012, and listed property, which returned more than 20% for the year both in New Zealand and globally.

Fixed interest didn’t fare so well, with New Zealand bonds returning only 5.14% for the year and global bonds providing a more substantial 8.39% return.

The three-year performance of growth funds (6.6%) has now caught up to conservative funds (6.0%) after taking a hammering in the early days of KiwiSaver post-GFC, but five-year returns (2.7% versus 5.3%) are still lagging.

The Aon Milford fund was the top performer in 2012 returning 26.8%, while the Milford Active Fund has been the top performer over five years with an average return of 11.6%.

“The best-performing KiwiSaver options over the past five years continue to be SIL KiwiSaver (as well as National Bank and ANZ KiwiSaver) in the Conservative, Balanced, and Growth Multi-Sector categories,” Morningstar said in its report.

“Fidelity KiwiSaver has also performed strongly in the Balanced and Aggressive Multi-Sector categories. Others worthy of mention include Aon KiwiSaver Russell in the Conservative and Moderate categories, Brook KiwiSaver across Balanced and Growth, and Fisher Funds KiwiSaver Growth.”

Overall KiwiSaver funds under management reached $13.6 billion at the end of December, an increase of $3.3 billion in one year. The largest providers are OnePath ($3.4 billion) and ASB ($2.9 billion) who account for more than 46% of KiwiSaver assets between them.

Conservative funds ($5.1 billion) continue to be favoured by investors and are more than double the size of balanced funds ($2.4 billion) and growth funds ($2.2 billion); as a result, more than 56% of KiwiSaver money is invested in cash and bonds.

More than five years after KiwiSaver began, BNZ looks set to finally join the game.
 

BNZ has long been the only major bank without its own KiwiSaver product and has instead offered the AXA KiwiSaver scheme to retail customers and the AMP KiwiSaver scheme to business clients.

But it has now registered a KiwiSaver scheme with the Financial Markets Authority.

BNZ Investment Services is listed as the manager of the scheme and Guardian Trust as the trustee.

BNZ’s scheme has been in the pipeline for some time and the bank employed Tracey Berry, who set up KiwiSaver schemes at both Kiwibank and Westpac.

By entering the game so late BNZ has given up a lot of ground to its competitors; according to the latest Morningstar figures ANZ-owned OnePath and ASB control a combined $6.3 billion, 46% of the KiwiSaver market.

Last year Parliament scuppered BNZ’s plan to offer a mortgage-linked KiwiSaver product by banning such a product tie-in.

The late entry of BNZ has sparked speculation it may buy the wealth management business of Tower, which is a default provider and has just under $900 million under management in its KiwiSaver scheme and $4.2 billion overall.

Former Fisher Funds chief investment office Warren Couillault is involved in a new venture that has launched a KiwiSaver scheme.

The Generate KiwiSaver scheme, New Zealand’s newest KiwiSaver scheme, was registered with the Financial Markets Authority on December 17.

Generate Funds was established in November and its directors include Couillault and Peter Brook, an independent director of the Argosy property fund.

One of its shareholders is Henry Tongue, who was a senior portfolio manager at the Huljich KiwiSaver scheme which was bought by Fisher Funds for just under $21 million after its founder Peter Huljich got into trouble for misleading investors.

Couillault left Fisher Funds in 2008 and in 2011 teamed up with the Rich Listed Spencer family to launch fund management firm Richmond Investment Group, which offered funds-of-funds that invested in a group of undisclosed hedge funds.

No investment statement or prospectus has been released for the Generate scheme yet.